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ALLEGATIONS OF DISCRIMINATION AND RETALIATION WITHIN THE

CONSUMER FINANCIAL PROTECTION BUREAU, PART THREE

HEARING BEFORE THE

SUBCOMMITTEE ON OVERSIGHT

AND INVESTIGATIONS OF THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED THIRTEENTH CONGRESS

SECOND SESSION

JUNE 18, 2014

Printed for the use of the Committee on Financial Services

Serial No. 113–85

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VerDate Nov 24 2008 13:05 Nov 17, 2014 Jkt 091149 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 K:\DOCS\91149.TXT TERRI

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HOUSE COMMITTEE ON FINANCIAL SERVICES

JEB HENSARLING, Texas, Chairman

GARY G. MILLER, California, Vice Chairman SPENCER BACHUS, Alabama, Chairman

Emeritus PETER T. KING, New York EDWARD R. ROYCE, California FRANK D. LUCAS, Oklahoma SHELLEY MOORE CAPITO, West Virginia SCOTT GARRETT, New Jersey RANDY NEUGEBAUER, Texas PATRICK T. MCHENRY, North Carolina JOHN CAMPBELL, California MICHELE BACHMANN, Minnesota KEVIN McCARTHY, California STEVAN PEARCE, New Mexico BILL POSEY, Florida MICHAEL G. FITZPATRICK, Pennsylvania LYNN A. WESTMORELAND, Georgia BLAINE LUETKEMEYER, Missouri BILL HUIZENGA, Michigan SEAN P. DUFFY, Wisconsin ROBERT HURT, Virginia STEVE STIVERS, Ohio STEPHEN LEE FINCHER, Tennessee MARLIN A. STUTZMAN, Indiana MICK MULVANEY, South Carolina RANDY HULTGREN, Illinois DENNIS A. ROSS, Florida ROBERT PITTENGER, North Carolina ANN WAGNER, Missouri ANDY BARR, Kentucky TOM COTTON, Arkansas KEITH J. ROTHFUS, Pennsylvania LUKE MESSER, Indiana

MAXINE WATERS, California, Ranking Member

CAROLYN B. MALONEY, New York NYDIA M. VELAZQUEZ, New York BRAD SHERMAN, California GREGORY W. MEEKS, New York MICHAEL E. CAPUANO, Massachusetts RUBEN HINOJOSA, Texas WM. LACY CLAY, Missouri CAROLYN MCCARTHY, New York STEPHEN F. LYNCH, Massachusetts DAVID SCOTT, Georgia AL GREEN, Texas EMANUEL CLEAVER, Missouri GWEN MOORE, Wisconsin KEITH ELLISON, Minnesota ED PERLMUTTER, Colorado JAMES A. HIMES, Connecticut GARY C. PETERS, Michigan JOHN C. CARNEY, JR., Delaware TERRI A. SEWELL, Alabama BILL FOSTER, Illinois DANIEL T. KILDEE, Michigan PATRICK MURPHY, Florida JOHN K. DELANEY, Maryland KYRSTEN SINEMA, Arizona JOYCE BEATTY, Ohio DENNY HECK, Washington STEVEN HORSFORD, Nevada

SHANNON MCGAHN, Staff Director JAMES H. CLINGER, Chief Counsel


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SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

PATRICK T. MCHENRY, North Carolina, Chairman

MICHAEL G. FITZPATRICK, Pennsylvania, Vice Chairman

SPENCER BACHUS, Alabama PETER T. KING, New York MICHELE BACHMANN, Minnesota SEAN P. DUFFY, Wisconsin STEPHEN LEE FINCHER, Tennessee RANDY HULTGREN, Illinois ANN WAGNER, Missouri ANDY BARR, Kentucky KEITH J. ROTHFUS, Pennsylvania

AL GREEN, Texas, Ranking Member EMANUEL CLEAVER, Missouri KEITH ELLISON, Minnesota CAROLYN B. MALONEY, New York JOHN K. DELANEY, Maryland JOYCE BEATTY, Ohio DENNY HECK, Washington DANIEL T. KILDEE, Michigan STEVEN HORSFORD, Nevada


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C O N T E N T S

Page Hearing held on:

June 18, 2014 .................................................................................................... 1 Appendix:

June 18, 2014 .................................................................................................... 39

WITNESSES

WEDNESDAY, JUNE 18, 2014

Naraghi, Ali, Examiner, Southeast Region, Division of Supervision, Enforce-ment and Fair Lending, Consumer Financial Protection Bureau .................... 7

Williams, Kevin A., former Quality Assurance Monitor, Office of Consumer Response, Consumer Financial Protection Bureau ........................................... 11

APPENDIX

Prepared statements: Naraghi, Ali ...................................................................................................... 40 Williams, Kevin A. ............................................................................................ 45

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

McHenry, Hon. Patrick T.: Letter from Akin Gump Strauss Hauer & Feld LLP, dated June 17,

2014 ................................................................................................................ 50 Article from the Washington Examiner entitled, ‘‘CFPB official wants

to silence a whistleblower before he can talk to Congress,’’ by Richard Pollock, dated June 17, 2014 ....................................................................... 55

Green, Hon. Al: ‘‘Objective and Approach for Offices of Inspector General (OIG) Review

of Office of Minority and Women Inclusion (OMWI) Activities, Re-quested by Ranking Member and Colleagues, House Financial Services Committee, on March 24, 2014,’’ dated May 21, 2014 ............................... 58


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ALLEGATIONS OF DISCRIMINATION AND RETALIATION WITHIN THE

CONSUMER FINANCIAL PROTECTION BUREAU, PART THREE

Wednesday, June 18, 2014

U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON OVERSIGHT

AND INVESTIGATIONS, COMMITTEE ON FINANCIAL SERVICES,

Washington, D.C. The subcommittee met, pursuant to notice, at 2:05 p.m., in room

2128, Rayburn House Office Building, Hon. Patrick T. McHenry [chairman of the subcommittee] presiding.

Members present: Representatives McHenry, Fitzpatrick, Duffy, Fincher, Hultgren, Wagner, Barr, Rothfus; Green, Cleaver, Beatty, Kildee, and Horsford.

Ex officio present: Representative Hensarling. Chairman MCHENRY. The subcommittee will come to order. The

title of today’s hearing of the Oversight and Investigations Sub-committee is, ‘‘Allegations of Discrimination and Retaliation Within the Consumer Financial Protection Bureau, Part Three.’’

Without objection, the Chair is authorized to declare a recess of the subcommittee at any time.

The Chair now recognizes himself for 5 minutes for an opening statement.

On Thursday, March 6, 2014, the American Banker published an article titled, ‘‘CFPB Staff Evaluations Show Sharp Racial Dispari-ties.’’ It provided evidence that the Consumer Financial Protection Bureau’s (CFPB’s) own managers have shown distinctly different patterns in how they rate employees of different races.

It is now apparent that the CFPB was aware of the racial dis-parities and key metrics well before the March 6th American Bank-er article. A study on diversity and inclusion commissioned by the CFPB and conducted by the revered consulting firm, Deloitte Con-sulting, was provided to the Bureau in September of 2013. That study noted sharp racial disparities in performance ratings, pay, hiring, and other areas.

In addition to racial disparities in the CFPB’s performance re-views, the American Banker also reported that, ‘‘CFPB’s manage-ment has been accused in several cases of favoring Caucasian men and of creating a hostile work environment.’’ The article noted that CFPB employees had filed 115 official grievances with the National Treasury Employees Union (NTEU), which represents CFPB em-


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ployees, and over 85 informal complaints, most of which pertained to allegations of unequal pay, and raised questions about the recent performance reviews.

This subcommittee held a hearing on April 2nd of this year, which addressed allegations of discrimination and retaliation at the CFPB. It featured the testimony of Angela Martin, a current CFPB employee and a whistleblower, as well as Misty Raucci, an investi-gator hired by the CFPB to examine Ms. Martin’s claims of retalia-tion.

On May 21st of this year, the subcommittee held a second hear-ing on the topic of discrimination and retaliation within the Bu-reau. Liza Strong, Lead of Employee Relations for the CFPB, testi-fied that the allegations of discrimination and retaliation made by Ms. Martin and Ms. Raucci were not consistent with her experience at the CFPB.

Ben Konop, an attorney within the CFPB’s Enforcement Divi-sion, and the Executive Vice President of the union chapter rep-resenting CFPB employees, testified on CFPB’s resistance to ad-dressing sharp racial disparities on its performance management review ratings from the period of March 2014 through May 6, 2014. And that is when the American Banker article was published, that March 6th date. Mr. Konop also testified about sharp racial dis-parities and pay in the Bureau.

Today’s hearing will feature testimony from two whistleblowers who both allege that they experienced discrimination and retalia-tion at the Bureau. Both whistleblowers will also testify regarding operational deficiencies within their respective divisions at the CFPB.

Ali Naraghi currently serves as an examiner in the Division of Supervision, Enforcement and Fair Lending at the CFPB. Mr. Naraghi alleges that he has experienced both discrimination and retaliation at the CFPB. Mr. Naraghi will also testify about defi-ciencies in the bank examination process as well.

Kevin Williams is a former term employee of the CFPB’s Office of Consumer Response. Mr. Williams will testify on the culture of discrimination and retaliation within the Office of Consumer Re-sponse, as well as the mismanagement and inexperience of leaders within the office. Mr. Williams will also testify about serious prob-lems with the CFPB’s consumer call center.

These problems include a significantly larger than expected num-ber of breaches of personally identifiable information (PII), a lack of training for call center staff, and inadequate CFPB oversight of its two call centers.

CFPB’s funding—I believe and many believe—and structure af-ford Congress an extremely limited ability to influence the Bu-reau’s operations and policies. And yet these allegations of dis-crimination and retaliation at the CFPB underscore the significant need for greater congressional oversight and much better manage-ment.

I thank the witnesses for their bravery in coming forward, and your willingness to come forward. I appreciate your fortitude.

With that, I ask unanimous consent to include a letter in the record, and I will give context to my colleagues. Yesterday, the sub-committee received a letter from John Dowd, legal counsel for Liza


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Strong, a high-ranking CFPB official who previously testified be-fore this body, asking that the testimony of one of today’s wit-nesses, a whistleblower, be stricken from the committee’s official record.

This letter is deeply troubling because it is apparently an at-tempt to prevent certain testimony from coming before the sub-committee and the American people. That is problematic. And I would like to make it public.

It could be construed as an effort to intimidate other witnesses at the Bureau as well who may wish to blow the whistle to Con-gress. And it may interfere with the congressional oversight that our subcommittee and other committees are attempting to provide.

I ask unanimous consent that the letter, and a June 17th Wash-ington Examiner article reporting on that letter, be entered into the record. And I would like to make clear that this subcommittee intends to thoroughly investigate whether this letter was an effort to, in any way, constrain this investigation.

I ask unanimous consent to include those items in the record. Chairman MCHENRY. Without objection, it is so ordered. And I

would certainly welcome those who are testifying today, and would be willing to include in the record of this day’s proceedings your or your attorney’s responses to that.

At this point, we will recognize the ranking member of the sub-committee, Mr. Green of Texas, for 5 minutes.

Mr. GREEN. Thank you, Mr. Chairman. I thank the staff for the very fine work it has done in preparing

for this hearing today. I also thank the witnesses for appearing today. And I have several things that I would like to note in terms of what I am committed to.

I am committed to getting to the bottom of the allegations of dis-crimination. I believe that discrimination is abhorrent and that it must be eradicated. And to this end, I pledge to do all that I can to help eliminate invidious discrimination.

I have to also add, having been a judge for some number of years, I have learned that until you hear both sides of a story, you should not draw conclusions. I welcome your testimony. But I can-not draw conclusions until I have heard from other sides as well. I think that is a fair way to proceed.

In fact, it is the American way to give all persons the opportunity to be heard before conclusions are drawn. So, I am committed to getting to the bottom of allegations of discrimination.

I am also committed to protecting the institution, the CFPB, the Consumer Financial Protection Bureau. And I believe the witnesses are committed. And I shall make inquiry when appropriate. But I believe you are committed to this as well.

I believe that the institution is absolutely necessary. It is the cop on the beat. It is there to protect the consumer. And as such, I liken any allegations of invidious discrimination to concerns that may emanate from a police department.

In a police department, you can have concerns raised about dis-crimination and other issues as well. We have had some raised in my city. But we didn’t eliminate the police department. We dealt with the issues. And they should be dealt with. But you keep the department.


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I see the CFPB as a department that may have some concerns that have to be addressed. But we keep the department. And we want to make sure that we keep it strengthened.

We don’t want to eviscerate. We don’t want to emasculate. We want to make sure that we maintain a strong Consumer Financial Protection Bureau.

And the third thing that I am committed to is a widening of these investigations. The ranking member of the full Financial Services Committee and I have so much as asked the Inspectors General to look into allegations of discrimination, widen the range and breadth of these allegations, and check to see if there are other agencies that may be having similar circumstances.

We should not focus on the Consumer Financial Protection Bu-reau to the exclusion of others. It can be a part of a process, but not the end of a process. To this end, I pledge and I am committed to widening the range of the investigation.

And finally, I want to say that this hearing today is important to me. It is important to me for a multiplicity of reasons. I shall cite but one.

In my lifetime, I have been discriminated against. I know what it feels like to be discriminated against. I have seen invidious dis-crimination.

I know what it smells like. I have had to go to the colored water fountains that were such that no one would want to drink the water. I know what it looks like. I have had the Klan burn a cross related to some of my efforts. I know what it sounds like. I have been called ugly names, names that I don’t even speak.

So I know what it is about. But I also know this: We have a duty to be fair to all persons associated with any allegations. So I pledge to do all that I can, which means to be fair to all sides and not draw conclusions based upon what I hear from any one side.

Mr. Chairman, in the interest of time and because votes have been called, I will yield back my time.

Chairman MCHENRY. I thank the good judge. With that, we will now recognize Mr. Hultgren for 2 minutes. Mr. HULTGREN. Thank you, Mr. Chairman. There is something deeply wrong with the day-to-day operations

at the Bureau. We will hear allegations of rampant favoritism, dis-crimination, cronyism, and mismanagement at the CFPB alongside a culture of intimidation and retaliation that make it difficult to address these problems. We will also hear disturbing concerns about the efficiency and efficacy of the CFPB’s examination proc-ess, which are essential to the CFPB’s alleged mission to protect consumers.

Unfortunately, not only do CFPB employees feel helpless to do anything about this, but there is also inexplicably no meaningful accountability mechanisms in place that could help fix these prob-lems. The independent Inspector General for the Federal Reserve and the CFPB is stretched thin overseeing around 3,200 employees. The CFPB, one of the most unaccountable agencies in our Nation’s history, could certainly use its own IG.

What is more, unlike the SEC and other regulatory agencies, the CFPB is governed by one lone Director instead of a bipartisan


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board. Not only that, Congress is hampered from using its power of the purse to encourage much-needed changes.

The CFPB’s champions hold that these features that make the Bureau unaccountable are an asset because they help it function smoothly without outside interference, and better serve consumers. This hearing should put that myth to rest.

Consumers are not protected by unrestrained bureaucrats un-bound by the Constitution’s structure. The founders knew better than to create agencies unaccountable to the American people. They knew as we do that government programs don’t function well without healthy oversight and accountability features in place.

While we all want these disturbing allegations of discrimination and incompetence to be addressed in a way that vanquishes these problems for good, until the CFPB structure is significantly altered, I am not holding my breath.

Thank you, Mr. Chairman. I yield back. Chairman MCHENRY. I thank my colleague. In the interest of Members’ time we will, after Mr. Cleaver’s

opening statement, recess and then return once we have Members back. And then, we will hear the testimony.

Mr. Cleaver is recognized for 5 minutes. Mr. CLEAVER. Thank you, Mr. Chairman. I appreciate you calling

the hearing and dealing with this issue of discrimination. I think discrimination is regrettable. It is stupid. It is heartless.

And it is about as unseemly as a human being can get. Much of my adult life has been spent dealing with the issue. I

hate discrimination and all of its manifestations. I think that we ought to shed light on discrimination in any of the Federal agencies that report to this committee.

As I have done before, I will continue to say that the one depart-ment that I think the whole world recognized as having the most serious problems in the Federal Government on the issue of dis-crimination was the Department of Agriculture. So much so that the Federal courts awarded African-Americans, Latinos, and Na-tive Americans awards, financial awards because the discrimina-tion was so blatant.

And it went on for decades and decades that actually started right there at the Department of Agriculture. Most of that has been corrected with the Disparity Study. And recommendations have been brought forth. And the Secretary has tried to deal with them.

But not one hearing was held in the U.S. House of Representa-tive or the U.S. Senate to deal with an individual case. It went to the courts. And the courts, after years, ruled that discrimination in fact had occurred. And the money, frankly, is still being disbursed even as we meet here today.

And so my caution, Mr. Chairman, is that we get bogged down in doing something the Federal agencies and the committees of the Congress were not equipped to do, and that is actually hold a trial. I am going to depend on my longtime friend and colleague who has a law degree and has been a judge. But I am not equipped, I don’t think.

I did get an ‘‘A’’ in political science, but I don’t think that has equipped me to deal with a trial-like situation and then at the end


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say we did have discrimination or this has been an act of discrimi-nation. Because that means we are a jury.

So I am pleased to see the corrective actions that are being taken. I think that your interest has probably caused the depart-ment to become a lot more conscious of and sensitive about any-thing that could be seen as discrimination. And so, that has been good.

I caution you, members of the committee, that we don’t end up becoming the jury for discrimination cases in one Federal agency.

Thank you, Mr. Chairman. I yield back the balance of my time. Chairman MCHENRY. I appreciate my colleague’s sentiments and

words. We will recess, and once Members return, we will hear from the

witnesses. This committee is in recess. [recess] Chairman MCHENRY. The committee will come to order. We will

now recognize the distinguished panel before us. I will first introduce Mr. Ali Naraghi. He is an examiner for the

Southeast Region in the Division of Supervision, Fair Lending and Enforcement for the CFPB. He has worked as an examiner at the CFPB since July 2011. Prior to joining the CFPB, Mr. Naraghi served as a Supervisory Financial Analyst at the Federal Reserve Board for 14 years.

Mr. Naraghi is a graduate of the American Bankers Association Stonier Graduate School of Banking at Georgetown University, and received a Masters of Business Administration from Mississippi State University. Mr. Naraghi has also received numerous awards during his tenure at the Federal Reserve Board, including the Ex-cellence Award for examination of mortgage servicing.

Our second witness is Mr. Kevin Williams. Mr. Williams is a former Quality Assurance Monitor for the Office of Consumer Re-sponse for the CFPB. Mr. Williams was hired in March 2011 as a term employee, and his service at the CFPB ended in February of 2014. Mr. Williams was responsible for CFPB’s contract call cen-ters, and ongoing maintenance of the quality assurance program, including contract call center performance issues. Prior to his hir-ing at the CFPB, Mr. Williams managed private sector call service centers and performed operational analysis for various consulting firms.

Mr. Williams is a graduate of Trinity University in Deerfield, Illi-nois, and received a Masters of Business Administration from the University of Phoenix. He also received professional certification for contracting contact centers and management.

The witnesses will each be recognized for 5 minutes. And as this is the first time either of you has testified before the committee, we ask that you please pull the microphone uncomfortably close to you; they are directionally sensitive. And so, if you speak a little more slowly, it will obviously be more helpful.

We have a lighting system: green means go; yellow means go faster; and red means stop.

First, we will recognize Mr. Naraghi for his opening statement.


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STATEMENT OF ALI NARAGHI, EXAMINER, SOUTHEAST RE-GION, DIVISION OF SUPERVISION, ENFORCEMENT AND FAIR LENDING, CONSUMER FINANCIAL PROTECTION BUREAU

Mr. NARAGHI. Thank you, Mr. Chairman. My name is Ali Naraghi, and I currently serve as an examiner in the Southeast Re-gion of the Supervision, Enforcement and Fair Lending Division at the Consumer Financial Protection Bureau. Thank you for allowing me this opportunity to share my experience at the CFPB with you.

Ms. Angela Martin mentioned me in her testimony on April 2nd of this year. I am the naturalized U.S. citizen that Bureau manage-ment referred to as an ‘‘F’ing foreigner.’’ I take great pride in serv-ing my country for 14 years with distinction at the Federal Reserve Board of Governors, prior to joining the Bureau 3 years ago at its inception. And I am proud of my Persian heritage.

Like many others, I feel fortunate to have immigrated to the United States, and love to serve my country. I do not deserve to be referred to in derogatory terms by Bureau management.

I hope by telling you my story it will further enlighten the com-mittee about the cultural intimidation and retaliation at the Bu-reau, and how it makes it very difficult for employees to raise con-cerns about mistreatment, mismanagement, and abuse of author-ity.

Many managers, especially within the Southeast Region, are withholding promotions of internal candidates while bringing exter-nal candidates from their personal or other connections. In short, favoritism and cronyism runs rampant at the Bureau.

My testimony is based specifically on my experience with man-agement of the Southeast Region and management in the Office of Supervision at the headquarters at the Bureau, and is not a reflec-tion of my fellow examiners, who like me are highly dedicated to serving the American consumers.

Our lead examiner for the first year of CFPB examination, which was started in October of 2011, during those 5 months in that as-signment I raised concerns about not having a risk model to show equitable assessment across institutions: inexperienced exam man-agers, field managers, and the examiner in charge; the examiner in charge being unduly influenced by the institution being exam-ined, allowing the institution to dictate what CFPB examiners can and cannot do; inefficient use of Bureau resources, for example, they flew in examiners from around the country for weeks just to plan the examination and later to conduct an exam when we had plenty of locally available examiners who would have saved tax-payers up to 5 months’ travel expenses, an average expense of $2,000 per week per examiner.

I soon found that voicing a professional dissenting opinion that is in any way at odds with Bureau management, even in the small-est of ways, would result in retaliation, for example, after sug-gesting to the Chief Human Capital Officer, Dennis Slagter, that senior management should consider including experienced staff from the Federal Reserve, the Office of the Comptroller of the Cur-rency, and the FDIC when strategizing about large banks super-vision program because CFPB’s supervision seemed too OTS-cen-tric.


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In response, Mr. Slagter stated, ‘‘If you don’t like it, go back to the Federal Reserve Board.’’ This is in direct contradiction of CFPB’s stated policy of welcoming feedback.

In addition, I have raised concerns to management and the Office of Inspector General of the Federal Reserve about the following issues: the Bureau has hired inexperienced managers whose only qualification appears to be personal or other connection to Bureau hiring officials; gross mismanagement that wastes taxpayers’ funds, for example, in the Southeast Region, about 50 to 75 exam-iners were kept at their home essentially without work for 8 months between approximately September 2011 through May of 2012. In my opinion, this was one of many examples of wasting taxpayers’ funds due to Supervision management’s incompetence.

Result-oriented examinations in which the Bureau at the head-quarters appears to have decided at the outset to find a violation even if none are identified. I worked on examination for 3 weeks reviewing 52 mortgage modification applications and did not find any violations. The field manager told me that I must not have done my job right because I had not identified any violations. Oth-ers in my team were told to expand their sample size if no viola-tions were identified in the initial sample. This is contrary to sam-pling procedures of the FFIEC and prudential regulators. Further-more, there is no statistically sound rationale in conducting exami-nations in this manner.

CFPB management imposes cumbersome and inefficient national exam procedures for examinations, and doesn’t give examiners or the EICs any discretion in applying those positions. The exams are very inefficient. They take at least 6 weeks on-site, regardless of the size in assets and our footprint. Whereas exams performed by other regulators take size, risk, and complexity of institutions into consideration during the planning and scoping phase of the exam-ination, resulting in a more efficient and cost-effective process.

The Enforcement Division joined the examiners and occasionally mentioned plans to bring enforcement actions prior to completion of exam work and of discovering a violation. I did my best to work within the Bureau’s management and oversight instruction to ad-dress this issue. However, once management had started to retali-ate, and as they are being subjected to disparate treatment, I filed an EEO complaint against the Southeast Region’s management.

I immediately became one of the targets of Regional Director Jim Carley and Assistant Director of Supervision Paul Sanford at the CFPB headquarters as a result of questioning examination man-agement and filing a formal case about abuse and disparate treat-ment. They proceeded to make my professional, and also I think, personal life a living hell by repeated retaliation and creating a hostile work environment.

Examples of retaliations include immediately after filing an EEO complaint in May of 2012, management issued me a reprimand let-ter for not attending a training class which I was registered for by management without my knowledge. Removing me from being an EIC and requiring me to attend training to serve as an EIC as a requirement only for me and no other at my grade. In fact, I haven’t been assigned an EIC role since filing my EEO case, de-


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spite it being a requirement in my position description, the highest examiner grade for the Bureau.

Reporting me absent without leave for an entire week for re-questing sick leave, despite having a doctor’s note requiring bed rest to avoid getting pneumonia due to severe bronchitis. Accused of asking bank management to show me how to do my job, when in fact I was trying to protect the integrity of the Bureau by help-ing the field manager recover from asking questions that dem-onstrated his incompetence and lack of knowledge about mortgage banking.

Being wrongfully accused of—accused and written up for falling asleep at a meeting with the institution’s president. The fact as re-ported by the EEO independent investigator that I was awake and most active when was confirmed by several colleagues and a CFPB enforcement attorney who were present. However, Mr. Carley in-sisted that my field manager issue a written warning threat of dis-ciplinary action.

I was issued ‘‘unsatisfactory,’’ which is our lowest performance evaluation rating, in 2012, when in fact at midyear I was rated ‘‘commendable.’’ This was my punishment for raising concerns about my manager during the last 3 months of the evaluation pe-riod. And in February of 2014, my field manager informed me that he knows I am well-qualified, but the order that I cannot be an EIC came from above the Assistant Regional Director level.

Like Ms. Martin, the retaliation against me continues to this day. Like Ms. Martin, my story is a microcosm. And when you look at me, you should see dozens and even scores of employees instead of just me. The Labor Relations Office within the Office of Human Capital is broken, and is more harmful than helpful to employees who suffer discrimination or retaliation.

Because I was concerned about examiners who work with me as well as my own treatment, I wrote an urgent email on July 26, 2012, asking the Deputy Human Capital Officer and Employee Re-lations Lead, Ms. Liza Strong, for help. I pointed out the mistreat-ment I was receiving as well as listing directives provided to exam-iners by field manager Jerome Uberu, which according to my expe-rience was unprofessional, contrary to the standard supervisory protocols, and possibly illegal.

It took from July 26, 2012, until October 18, 2012, nearly 3 months, for Ms. Strong to reply to me. Unlike her testimony before you that she investigates all complaints, her response was simply to add retaliation claims to my EEO complaint.

I was stunned that she did not show any interest or concern re-garding management’s mistreatment of myself and my fellow ex-aminers, or at least potentially illegal directives. As a matter of fact, not only did she not investigate my complaint, she refused to be interviewed by the EEO investigator assigned to my EEO case.

Pursuant to an announcement on CFPB’s internal Internet titled, ‘‘CFPB Wants You to Blow the Whistle on Lawbreakers,’’ I felt compelled to report my observations to the Inspector General of the Federal Reserve Board.

I was promptly contacted by an IG staff member and as in-structed on July 25, 2012, sent an email detailing my situation, as well as bullets enumerating what I thought to be mismanagement


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by division senior management, waste of government resources, fa-voritism in hiring practices, as well as what I thought may be ille-gal labor practices. I was told that the IG office will be in touch if necessary. However, no one has contacted me since that date.

Furthermore, I attempted to engage my Regional Director, Jim Carley, by sending him an email requesting time to discuss an im-portant matter. I never got a chance to discuss my concerns with him. Mr. Carley never attempted to follow up with me to ask what was so important.

One of my concerns at the time was that during examination, the field manager, Mr. Uberu, was inappropriately telling examiners to find issues against the supervised entity that did not exist, but were solely based on his opinion that the subject bank had issues. All affected examiners felt uncomfortable with Mr. Uberu’s ap-proach at the time, but were afraid to speak out for fear of retalia-tion.

After I pointed out Mr. Uberu’s mistake, he wrote the worst eval-uation I have ever received in my professional career. The evalua-tion intentionally misrepresented incidents and sometimes even falsified the records of what took place in the Bureau of Examina-tion.

Management’s mischaracterization has been proven wrong by an independent investigator from the Internal Revenue Service as-signed to my EEO case. In that investigation, one of my colleagues bravely testified that the field manager, Mr. Uberu, ‘‘felt intimi-dated by Mr. Naraghi’s experience and credentials.’’ My colleague further reported that, ‘‘Mr. Uberu’s management style is one of in-timidation and force.’’

Unfortunately, Ms. Strong wholly ignored my complaint about this manager. And now others have suffered and are continuing to suffer under his mismanagement. Subsequent to my complaint at least two other examiners have also reported their own serious complaints about Mr. Uberu’s boorish intimidation tactics.

Ms. Strong’s outright dismissal of my own legitimate concerns of mismanagement has caused Mr. Uberu to become more brazen in his intimidation and abuse of my fellow examiners. I am deeply saddened with the realization that my colleagues’ hardship could have easily been avoided if the Bureau had acted promptly and re-sponsibly to the concerns of its employees.

Employee Relations Lead Liza Strong is failing to adequately protect Bureau employees, and in fact causes us further harm by holding herself out as point of contact for us to address our con-cerns, when actually she is just another arm of management and another example of the Bureau’s management abusing their power.

I appealed my manager’s unfair evaluation of me, and all CFPB management across other divisions who were supposed to complete an independent review of my appeal circled the wagons. As a re-sult, in the most humiliating experience, Mr. Carley, who himself has lesser to no experience in Federal mortgage servicing laws, forced me to attend remedial mortgage servicing training with the threat of being fired if I cannot pass the exam.

My field manager expressly told me that I am untrainable. By point of fact, I told my management and Labor Relations staff that I have earned two bachelor’s degrees, an MBA, and graduated from


11

ABA Stonier Graduate School of Banking. So, CPFB’s mischaracterization of me as untrainable is demonstrably false.

When my fellow examiners found out that I may be appearing as a witness here, many of them personally contacted me and urged me to be certain to shed light on the unfair and sometimes deceptive practices of supervision management. Unfortunately, the Southeast Region examination program is run by intimidation. And like a dictatorship, there are significant consequences to dis-agreeing or disobeying the king.

Almost every examiner I know has pending or rejected griev-ances. Management espouses collaboration and respect with the staff and shows no respect with examiners. And there is no ac-countability for their abusive power.

Contrary to Ms. Strong’s testimony, legitimate concerns and com-plaints filed by examiners are rejected outright without due consid-eration. I believe that the Labor Relations Office, headed by Ms. Strong, is a common denominator in the mistreatment of exam-iners and other employees.

It seems like Labor Relations will side with management no mat-ter how egregious their actions may have been, which has caused resentment and distrust amongst the employees. The lack of prompt attention and resolution by the CFPB to legitimate em-ployee concerns causes problems to fester needlessly and detracts from the ability to focus on the mission of helping American con-sumers.

I believe that the root cause of the problems encountered at the Bureau is management’s lack of accountability. The only consistent thing about CFPB management is its inconsistency.

It is my sincere hope that the Bureau will take immediate steps to remedy these fundamental management issues and thereby be-come more efficient in carrying out this vital mission for our coun-try.

Thank you. [The prepared statement of Mr. Naraghi can be found on page

40 of the appendix.] Chairman MCHENRY. Thank you. Mr. Williams, you are now recognized to summarize your opening

statement.

STATEMENT OF KEVIN A. WILLIAMS, FORMER QUALITY AS-SURANCE MONITOR, OFFICE OF CONSUMER RESPONSE, CONSUMER FINANCIAL PROTECTION BUREAU

Mr. WILLIAMS. Good afternoon, Mr. Chairman, and subcommittee members. It is without any joy that I appear before you today.

My name is Kevin A. Williams. In the fall of 2011, I enthusiasti-cally applied to help build and launch the Consumer Financial Pro-tection Bureau, the financial regulatory agency that was dubbed a 21st Century organization. I served as the CFPB Office of Con-sumer Response’s first Quality Assurance Monitor from July 2011 to February 2014.

The terms of my employment were a year-to-year term contract. Understanding the provision of my contract, I made it paramount that I will work hard and secure permanent employment as soon as possible. At various times, I approached management about my


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status, and in every term they lied. Whether I inquired, or the Na-tional Treasury Employees Union inquired on my behalf, we were both consistently lied to.

Sadly, instead of the positive, modern government agency I ex-pected, my experience at the CFPB was reminiscent of past eras of injustice, cronyism, discrimination, and retaliation. The events that transpired at the Bureau occurred because basic measures were not in place to properly supervise its untested management. In particular, the managers in the Office of Consumer Response ran the unit as their own personal fiefdom, unfettered by any over-sight they inadvertently might receive.

The divisiveness and disharmony in CR, Consumer Response, did not occur because of unruly employees, underperformers or dis-enchanted team players. It occurred because Consumer Response’s unproven management team was not properly prepared for the big job we face. No policies or procedures were implemented to ensure that they abided by applicable laws and followed accepted manage-ment practices.

I was the only member of the implementation team who was not offered permanent employment or a promotion. Yet, some of the people I worked with now lead Consumer Response. My treatment was especially notable because I was a lone team member who per-formed most of the quality assurance function for the entire agen-cy’s contact centers.

My statement is not long enough to respond to all of the asper-sions that were directed at me. But I ask you to question how a person responsible for your consumer interaction quality assurance function for a new Federal agency could be excluded from meetings, and branded as lazy and unproductive.

I am proud of my principles and my work. My best response to any management disagreement of my job performance, Consumer Response continuously touted the results I produced. Consumer Re-sponse’s management team continuously received bonuses based in part on my work.

I worked on the quality assurance team supervised by two Black women managers. One of my managers was a manager in name only. For over 2 years, she did little more than discredit my work, disparage my character, and downplay my achievements.

I was attacked, maligned, and humiliated on a daily basis. For example, I was rated as an ‘‘average’’ employee despite being either the primary or the only quality assurance monitor for the entire agency’s contact center vendor. I listened to more calls, talked to more consumers, and made more correspondence than anyone in the agency. And yet, I received absolutely no credit for my work.

Make no mistake about it. It was clear I was treated this way and allowed to be treated this way by my few Black managers at the Bureau because of the ‘‘plantation’’ mentality that exists there. If my managers had been White managers instead of Black man-agers allowed to mistreat a Black male, every civil rights organiza-tion in America would have protested my treatment and the treat-ment of others in my unit.

I told Consumer Response’s management team that the scorecard used to evaluate consumer interaction with contacts in personnel was ineffective. Consumer interactions were randomly selected and


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evaluated either by myself primarily or later, when the team ex-panded, by others. The scorecard was ineffective because it was weighted so that the vendor was never heavily penalized.

This had two results. One, it would appear that the vendor was providing superb service because their score was in the 90s. Two, it would appear that Consumer Response was effectively managing the contract even though it was not.

When I expressed a problem with the way the scoring was weighted and the results utilized, my African-American managers, a quality assurance manager and section chief, their response was to inform the bosses that I was incapable of doing anything, of even doing the basics. And this wasn’t because I was incorrect, but be-cause she was offended that I, notwithstanding that I am a Black male, questioned the scoring methodology.

My Black managers, and thus the Bureau, treated me as a pa-riah because as a Black male I was not qualified to question the information provided by consultants, precisely and mainly because most of them were young White men.

Another example stems from the vendors being very concerned about receiving high quality assurance scores so as not to get pe-nalized in Bureau contracting decisions. Thus, when we would evaluate an agent more than once in this short amount of time, the vendor would call and complain to my manager that we were sin-gling out an individual.

However, we would have no idea of certain functions about the individual we would even evaluate. The way we selected items to evaluate was typically random. Consequently, in response, one of my former coworkers who is an African-American male told the quality assurance manager it does not matter who you evaluate be-cause we are not looking at the interaction of any particular agent.

The quality assurance manager did not agree with this state-ment from the male African-American QA monitor. However, she agreed with the same statement from a White male consultant.

Another example how Black managers at the Bureau were al-lowed to mistreat Black employees as part of misguidedly defend-ing the Bureau is when I did a presentation. I told the QA man-ager and the section chief that the two-way scoring system was out of line. I reported it to the QA manager, told them that it was dis-torting Bureau assessments of vendor performance. In response, my QA manager spoke to her superiors about my performance.

The Bureau’s leadership allowed my manager and section chief to undermine me and even my career, but not allow me to make the same insightful observation that the managers would accept from White male consultants who patronized them by cluing them in about the distorted evaluation system. This is discrimination.

The frequency and duration of these occurrences created a hostile work environment for all Blacks at the Bureau, whether they were unwitting, manipulated Black managers or mistreated, hard-work-ing Black employees. It is just that we, the latter, suffered the ob-jective adverse consequences. Despite establishing the quality as-surance team, my efforts generally were discounted.

The exception proven to this rule, however, was when Consumer Response’s managers themselves would be rated based on the con-tact center being presented as being successful. In this regard,


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while I was there the managers I reported to were rated at the 4/ 5 level based on the center’s success. Yet the person doing the work, me, was rated as average, a 3.

This was a Bureau-wide problem confirmed by this result. Since the managers were in fact being rewarded for discriminating against me, they were believing they were retaliating against a Black male whistleblower, since criticisms like mine were appar-ently being reported to overseers by unknown persons, leaving my managers to guess it had to be me. That it was both discrimination and retaliation became evident after a while through the intensity of it.

My few errors continued to be raised 2 or 3 years after their oc-currence. Yet the errors that my managers continued to make every month, every week, or even daily were overlooked, excused, and ignored by others for them to continue to perform ‘‘field hand control functions.’’

Unfortunately, I was a charter member in the intake unit, which indeed came to be referred as ‘‘the plantation.’’ There, I personally witnessed and was the victim of racial discrimination by Black managers as well as others. The unit was dubbed ‘‘the plantation’’ because when we started, the majority of Black employees were as-signed to intake, which was basically data entry.

The one Caucasian man at the intake unit who demonstrated an interest in software testing was offered a permanent detail to an-other group which led to the creation of a new position for him. Someone then remarked that this looked like a ‘‘damn plantation,’’ and the nickname stuck.

Thereafter, one of my former coworkers went to Consumer Re-sponse’s management and asked why did they recruit him for an investigator’s position, but when he arrived he was given a data entry job. Management responded by calling him into a room to be-rate him, curse him out, and denigrate his character.

I witnessed this firsthand, Black managers denigrating a Black worker for, in effect, complaining about the discrimination. It deep-ly reinforced the plantation imagery.

In fact, the extent of the adherence to this imagery became ludi-crous. During plantation team meetings, management often volun-teered to feed the team. But one day one of my team members re-marked, this does not only look like a plantation, but they keep feeding us greasy fried chicken and pizza. He said if they are going to feed us, they should offer us some healthy food at least once in a while.

I initially defended management until someone pointed out that we were a unit comprised entirely of Black employees standing around eating low-caste food, fried chicken, doing low-caste grunt work, the key attribute of being low caste, not receiving any re-spect.

In addition, we did not have any career path. There wasn’t a route we could take that would lead to a managerial position. If you were a Black employee on the plantation you were either a team lead or in the field. Not one team lead from my unit has ever been promoted to management.

Rather than allow the plantation workers to compete for vacant leadership positions, my managers hired two White males to over-


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see us, one directly from the contact center vendor, the other from Booz-Allen Hamilton, the consulting firm that has been well-com-pensated by CFPB.

I want to make this clear. The issue is not about those gentle-men’s character. It is the process whereby they became managers. It perpetuates the narrative of Consumer Response Intake being the plantation.

The plantation is where Black women and White men oversee a unit of Black employees who are never considered or groomed for management, despite their competitive qualifications. Bureau man-agement excluded them from the outset as part of a strategy of domination and completely deprived them of any meaningful oppor-tunity for advancement.

If one exhibits too much merit or insight, one gets beaten down. The recognition of merit or insight, even when they are in the Bu-reau’s interest, remains reserved for a few others to the injury of all of us depending on the Bureau to reform.

I am responding to your question today while under subpoena. I am prepared to amplify upon the instances related above and fur-nish additional testimony to the committee upon its request.

[The prepared statement of Mr. Williams can be found on page 45 of the appendix.]

Chairman MCHENRY. I thank you both for coming forward. And I now recognize myself for 5 minutes for questions.

Mr. Naraghi and Mr. Williams, I will just ask you both a couple of questions. Do you believe that you were discriminated and retali-ated against at the Consumer Financial Protection Bureau?

Mr. WILLIAMS. Yes. Mr. NARAGHI. Yes. Chairman MCHENRY. Do you have reason to believe that other

employees at the Bureau were discriminated against and retaliated against?

Mr. NARAGHI. Yes. Mr. WILLIAMS. Yes, sir. Chairman MCHENRY. To your knowledge, have any of your man-

agers been fired or received formal sanctions for discriminating or retaliating against either of you?

Mr. NARAGHI. None that I am aware of, sir. Mr. WILLIAMS. No, sir. Chairman MCHENRY. Do you believe that the Director has to

take action with managers and hold them responsible for creating this culture of retaliation/discrimination?

Mr. NARAGHI. Yes, I do. Mr. WILLIAMS. Yes, sir. Chairman MCHENRY. Do you believe the Director’s continued re-

luctance to do that, to remove managers for discrimination/retalia-tion against you, has emboldened other managers to do the very same thing that you experienced?

Mr. NARAGHI. I believe so. As a matter of fact, when the Director came out recently after Ms. Strong’s testimony and defended her as a public servant and said that she didn’t deserve to be treated that way by the committee, I saw that as insult and I had a lot of my colleagues contact me and encourage me to testify because


16

they feel like nothing is going to change. It is just being ‘‘white-washed’’ is the reference—

Chairman MCHENRY. Thank you. Mr. Williams? Mr. WILLIAMS. Sir, managers were absolutely emboldened and

empowered by the lack of response from executive leadership at CFPB. They did nothing. And the longer it takes for anyone to re-spond, the worse it will become.

Chairman MCHENRY. Let me ask you, notwithstanding your ex-periences of being discriminated against and retaliated against, do you both still support the mission of the Consumer Financial Pro-tection Bureau?

Mr. NARAGHI. Absolutely. Chairman MCHENRY. Mr. Williams? Mr. WILLIAMS. Absolutely, sir Chairman MCHENRY. Okay. All right. I just want to make sure

that we have that on the record. Mr. Naraghi, you outlined that you had some serious concerns

about the bank examination process. Just in short, what would the most serious problems be?

Mr. NARAGHI. The most serious as I see it, having had experience at the Fed overseeing corporate governance, and at the Federal Re-serve Banks, as well as the large institutions, is that you have managers being put in charge of areas that they don’t have exper-tise in. And that causes them to make wrong decisions. It is ineffi-cient and ineffective.

I can only speak about the Southeast Region. They have all the way up on top somebody who does not understand supervision banking at all. And then, he tends to hire folks who don’t know much either. He tends to hire folks from his past experience—

Chairman MCHENRY. Is it a lack of experience? Mr. NARAGHI. It is lack of experience, lack of— Chairman MCHENRY. At that management level? Mr. NARAGHI. At management level, a lack of experience, as well

as a total insensitivity to basic labor laws or basic interpersonal skills.

Chairman MCHENRY. Okay. Mr. Williams, about the call centers, we had questions this morn-

ing about personally identifiable information (PII) from consumers who call in. And did you centers do that, take personally identifi-able information from consumers?

Mr. WILLIAMS. Absolutely, sir. They would take it in what we could call a channel. A channel in the contact center world means the ways that you can communicate with the contact center.

If I call on the phone, that is one channel. If I send a letter, that is another channel. If I send a fax, it is another channel.

So when a consumer would submit a complaint through any of the channels, it would have to contain PII so we could send it off to the bank so the bank could review the complaint.

Chairman MCHENRY. Okay. Did consumers mistakenly receive other consumers’ PII?

Mr. WILLIAMS. It did happen, yes, sir.


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Chairman MCHENRY. And did you see a high number of those incidences relative to call volume and every—those channel vol-umes?

Mr. WILLIAMS. What I saw, sir, was an abnormal number. It wouldn’t come consistently like we know there are 10 that are going to come every week, no. It would come in spurts.

We might see three this week. We might see five. We might not see any for a few weeks. But then, it would sprout up again.

That is abnormal. You should not see that many in years. You should never see that type because there should be security meas-ures and training in place to prevent this from happening.

Chairman MCHENRY. Thank you both for coming forward. Mr. Cleaver is recognized for 5 minutes. Mr. CLEAVER. Thank you, Mr. Chairman. Mr. Williams, you believe you have been discriminated against. Mr. WILLIAMS. Yes, sir. Mr. CLEAVER. On the basis of what? Mr. WILLIAMS. Same-race discrimination primarily, sir. Mr. CLEAVER. On the basis of race. Mr. WILLIAMS. Some race, some gender, sir, primarily. Would you

like me to expound, sir? Mr. CLEAVER. Especially the gender part. Mr. WILLIAMS. Yes, sir. My quality assurance manager and sec-

tion chief seemed to have an issue with African-American males. And it was an obvious issue that they had.

I can give you an example of at a certain point before I left, sir, the work for the quality assurance was done primarily by two Afri-can-American males, myself and another. Both of us at the behest of my quality assurance manager were placed on performance im-provement plans. Both of us were scrutinized and we received neg-ative marks on our performance review. This did not occur to the other gentleman who was not African-American in our unit.

Mr. CLEAVER. Okay. I get it. Now, on Page 2 of your statement, I am a little confused: ‘‘If my

managers had been White instead of Black managers every civil rights organization in America would have protested my treat-ment.’’

Mr. WILLIAMS. Yes, sir. Because they were Black women, people don’t seem to understand that discrimination can happen inter- race. You don’t have to be White to discriminate against a Black person or vice versa. They discriminated against me, and we are the same race, the same ethnic group.

Mr. CLEAVER. So they were discriminating against you on the basis of what?

Mr. WILLIAMS. Race. I would say race and gender. The reason why—

Mr. CLEAVER. You just—okay. Yes. I did the commencement at law school. I am not a lawyer.

My commencement was really good, but my address—so I don’t— you know I don’t—here is my—you are saying they discriminated against you. These are Black men who discriminated against you because you were Black.

Mr. WILLIAMS. Please—


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Mr. CLEAVER. Well, that is what you said. You said you had Black managers. I asked if they discriminated against you and you said yes. And I said why and you said race and gender.

Mr. WILLIAMS. Yes. Mr. CLEAVER. So the Black people didn’t like you because you

were Black. Mr. WILLIAMS. Yes, sir. They devalued our work. It is the same

thing that the Deloitte report alluded to. The same thing the De-fense Investigators Group alluded to. They devalued our work. It wasn’t treated the same.

Mr. CLEAVER. Okay. So this is to both of you. I am really confused. I have a headache.

But this is the reason we shouldn’t be involved in this. What would you like for Congress to do?

Mr. WILLIAMS. Are you asking me, sir? Mr. CLEAVER. Both of you. Mr. NARAGHI. I think that— Mr. CLEAVER. That we have the capacity and power to do. Mr. NARAGHI. Yes, sir. In my opinion, given the way that I have

observed the Southeast Region management as being unaccount-able for, I think that at the examiner level they could still use some supervision and basically some sort of repercussion. Because right now each division—each Regional Director runs it like a fiefdom without any recourse for the examiners.

Mr. CLEAVER. So you want Congress to do what? Mr. NARAGHI. To provide some sort of an oversight or something.

Put in place some sort of accountability, if you will, for middle management and top management of CFPB so such things don’t come to the level of explosion that you are seeing most of me and my colleagues are having to come to Congress to seek justice.

Mr. CLEAVER. But does not the EEOC provide that legal oppor-tunity for redress?

Mr. NARAGHI. Here is the thing, sir. I filed the EEO case, okay. And it took them a year-and-a-half to do the investigation.

Mr. CLEAVER. Then, that is Congress’ fault because we are not funding EEOC adequately to reduce the caseload. You are abso-lutely right. It is that way all over the country.

So you are saying you want Congress to approve more money— Mr. NARAGHI. No. Mr. CLEAVER. —for the EEOC? Mr. NARAGHI. I am saying, for example, Ms. Liza Strong runs

that office without any limits, without anybody overseeing her. What she says goes. And that is—

Mr. CLEAVER. I hate to cut you off. So what you want us to do is to get all the people who said they have been discriminated against and bring them before this committee and then do some kind of congressional something that I don’t know about?

Mr. NARAGHI. No, sir. That is not what I am suggesting. Mr. CLEAVER. My time has run out. Thank you. Chairman MCHENRY. I am willing to let that— Mr. CLEAVER. I just want somebody to tell me very precisely

what you want Congress to do. Mr. NARAGHI. I think that CFPB management needs to have

some sort of oversight in order to—and what do I mean by that?


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I mean that there should be some sort of accountability for the management of the CFPB. Because right now, when I complain about a Director, he goes up to his boss. And there is no account-ability. I have appealed the case unrelated to EEO, unrelated to what I am here, what I have testified about, since Christmas of last year.

Chairman MCHENRY. Okay. Mr. NARAGHI. It has been pending. There is no recourse— Chairman MCHENRY. Mr. Williams, we will give you an oppor-

tunity to answer the same question if you wish. Mr. WILLIAMS. I would like Congress to come in because you

have the ability to level the playing field through your power. Dis-parate treatment, we talk about the disparate impact at CFPB about banks and their impact upon consumers. You are having Federal employees experience disparate impact.

Congress can authorize an investigation by an investigator that is unrelated to the CFPB, an independent to come in that has over-sight authority. That is an option.

Chairman MCHENRY. Okay. We will now go to Mr. Fincher of Tennessee. Mr. FINCHER. Thank you. Thank you, Mr. Chairman. And just to respond to the gentleman from Missouri, I think the

budget is unlimited. I don’t—well, we don’t have authority in this committee over the budget. So, I don’t think it is the money issue that is the reason why they can’t—

Chairman MCHENRY. If the gentleman will suspend. And just to address this, internally, the Office of Human Capital

has resources to deal with this matter. And if it is not dealt with internally at the Bureau, my understanding of the operation of the law is that you can then have a hearing adjudicated in a formal EEOC process for remedy if the Bureau doesn’t handle it inter-nally.

So the question of internally, that capacity is unlimited. The question is that budget. And Mr. Cleaver is indeed correct on that. But Mr. Fincher is also indeed correct. Internally, they have an enormous capacity to do this.

Mr. Green, if you wish to— Mr. GREEN. I would only add, Mr. Chairman, that— Chairman MCHENRY. And I just ask unanimous consent that this

does not affect Mr. Fincher’s time. Mr. FINCHER. Thank you. Mr. GREEN. I would agree that it should not impact his time. But

I would also agree that Mr. Cleaver’s statement was with reference to the EEOC itself and its budgetary concerns, which are without the purview of the CFPB.

Chairman MCHENRY. Yes. And I appreciate that. And I would agree with my colleagues that the budget needs to be remedied to deal with that capacity.

I would ask unanimous consent to— Mr. GREEN. Mr. Chairman, if I may, would the gentleman yield?

If you are agreeing with your colleagues, you are not agreeing with the colleagues on this side, for the most part. When you said you agree with your colleagues that budget should be remedied, are you talking about the EEOC budget?


20

Chairman MCHENRY. Both the CFPB and the EEOC process, but in very different ways.

Mr. GREEN. With reference to the EEOC, we are in agreement. Chairman MCHENRY. Thank you. I ask unanimous consent to return Mr. Fincher to 5 full minutes

for his questioning. And I appreciate the witnesses’ indulgence on that.

Mr. FINCHER. Thank you, Mr. Chairman. I appreciate my col-leagues from that side of the aisle responding.

Mr. Naraghi, after filing your EEO complaint in May 2012, you went through what you describe in your testimony as a living hell. You also describe in your testimony that the retaliation against you by CFPB managers has continued. Can you describe what has oc-curred to you since 2012?

Mr. NARAGHI. Since 2014 or—I am not sure I understand since what date?

Mr. FINCHER. Since 2012. Mr. NARAGHI. Yes. Besides what I enumerated, basically I was

blackballed. The assignments that they were giving me are basi-cally not utilizing my years of experience and expertise.

Minor things like almost I would say childish: cancelling a vaca-tion that was already approved when my wife and kids had to go on vacation without me because they basically took back my ap-proved vacation; being accused of falling asleep in a meeting when that wasn’t the fact. The worse thing is giving me—

Mr. FINCHER. So you put in for a vacation but you were not al-lowed to take the vacation?

Mr. NARAGHI. Yes, sir. Mr. FINCHER. Wow. Mr. NARAGHI. They approved it. My manager approved it. But it

was right at the time where I mentioned Mr. Uberu had problems with me. And as a result of that, one of my punishments was they rejected—they said we need you at the exam.

And yet, this is what is funny. They criticized my work on the exam. And I said if you are not happy with my work, because re-member I was chastised for not filing an issue after looking at those, but yet you have canceled my vacation. And they said that is beyond your pay grade decision. You do what we tell you.

If they had the retaliation and retribution I am talking about is little, big. However they can come at you, they will.

That is why I don’t want to—what the biggest retaliation, sir, was when I was right when a colleague at the time said that he was worried about me having a heart attack because of the mis-treatment I was getting from these gentlemen.

And then getting all 1s that means you can barely—you are alive. Basically, 1s means you—and you have to remember. Look at me for 14 years at the Federal Reserve. I have done cash overs. I have performed well. And all of a sudden I come to the CFPB and the first 6 months I am commendable. Then—

Mr. FINCHER. The job before this job, where did you work before? Mr. NARAGHI. I worked at the Federal Reserve Board in Wash-

ington, D.C. Mr. FINCHER. And before that?


21

Mr. NARAGHI. Before that, I worked at Mayor International as a national accountant.

Mr. FINCHER. Have you ever been treated this way in any job ever in your life?

Mr. NARAGHI. No, sir. And I lived in Mississippi for 5 years. Mr. FINCHER. Okay— Mr. NARAGHI. No, I have encountered, like the gentleman said,

I have encountered racism, being called horrible names. It has never been, never, ever like this kind of—and especially because you expect not only is the government entity, you are working with professionals. You expect more, more than this kind of childish, boorish behavior, in my opinion.

Mr. FINCHER. Thank you. Mr. Williams, do you think there is a path out of the intake divi-

sion for employees who work there? Mr. WILLIAMS. After your last hearing, there is now. Initially, no.

I wrote the training program. One of my contracts as a contract of-ficer representative, I got with a vendor and I was responsible for the training for two to three divisions of the entire agency.

I had that vendor contract. I designed a training program with our training coordinator, presented it to a few section chiefs, and it was flat out rejected.

I explained to them how a person in intake could have been trained to go over to investigations. They have the building experi-ence. They have been at the agency. So you don’t have to orientate them to the mission. They are there.

So if you were not one of the section chief’s favorites, if she did not care for you, you were not getting out of intake. They made sure if they did not like you—if you were one of their favorites, they would find you a detail. They would do something special.

Suddenly, that detail is going to become a permanent job. And guess who is the greatest candidate, you. This is how they would operate.

Mr. FINCHER. My time is almost expired. But we all are Members of Congress. The buck stops with us and representing our districts.

Whether we like it or not, Mr. Cordray is head of this agency. And there are some accountability problems here. And hopefully, we will get to the bottom of it. I appreciate you both coming in.

I yield back. Chairman MCHENRY. The gentleman from Nevada, Mr. Horsford,

is recognized for 5 minutes. Mr. HORSFORD. Thank you very much, Mr. Chairman. And I want to say in the outset, I know this is a hearing that

we have had on this issue now several times. And I think it is im-portant for us to state at the outset that an unfair discriminatory workplace for any individual, regardless of their background, race, gender, or sexual orientation should not be tolerated, period. Whether it is at the CFPB or any Federal agency or private agency it is not part of what we expect in the workplace in the 21st Cen-tury.

I have listened to your testimony and the testimony of individ-uals who have come before this subcommittee, and I continue to be troubled by the allegations of discrimination. And I want to be able


22

to hear from you about those concerns and your suggestions for what should be changed.

I also want to say that I think we need to focus on how we ad-dress these issues from a systemic point of view. That sometimes hearing the testimony of, in this case two individuals, and then to make decisions about an entire agency, I think is problematic. But since you are here, I do want to hear your suggestions.

So, Mr. Naraghi— Mr. NARAGHI. Naraghi. Mr. HORSFORD. Naraghi. Thank you. And Mr. Williams, after lis-

tening to your testimony throughout this hearing and reading your full written testimony, beyond the issues that you have already raised, what specific suggestions or changes do you have that would help improve the work culture of the Bureau?

Mr. NARAGHI. I would suggest there has to be some sort of mech-anism. If this subcommittee had not formed this I would have no recourse because I genuinely as a naturalized U.S. citizen and as somebody, who like any other person, loves his country and obeys the law, I followed all the rules.

I asked the Human Capital Officer at the CFPB to let me know what I can do. I went through the protocol. At every turn I was turned down, sir. And I filed an EEO case and I am waiting. If this hadn’t happened, I probably would be looking for another job—

Mr. HORSFORD. If what hadn’t happened? Mr. NARAGHI. This subcommittee had not formed this— Mr. HORSFORD. But what do you expect out of this sub-

committee? Because I haven’t heard anything from— Mr. NARAGHI. All I am trying to do— Mr. HORSFORD. —the other side on what they plan to do. Other

than hearing your testimony and hearing the allegations. That doesn’t fix the problem that the employees of the Bureau are fac-ing. So what is it that you want to come from this process?

Mr. NARAGHI. I, as I am here to speak for myself. I am hoping by bringing this to your attention, to the Nation’s attention and CFPB senior management’s attention that they seriously try to fix it because everybody that I have come across, everybody I have had the honor to work for loves their job. They want to help consumers. Nobody—and this is interfering. This mismanagement—

Mr. HORSFORD. Okay. Mr. Williams? Mr. NARAGHI. —that we are suffering is interfering with that. Mr. WILLIAMS. As stated, sir, I appreciate the question. There

should be an independent investigator coming from this committee. Congress has the ability to assign to leverage the playing field. You have the ability of oversight and to eliminate the disparate impact that employees are facing.

So that is my suggestion, an investigator. Someone without con-nection to the agency to come in, not the Office of Minority and Women Inclusion (OMWI), but someone from the outside to come in and look at what has happened. Take the report seriously.

You shouldn’t have to come back here every couple of months and hear the same story from a neverending—from a cavalcade of current or former employees.

Mr. HORSFORD. And that is part of my concern, quite honestly, is at what point, Mr. Chairman, do we intend to actually propose


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recommended steps based on the testimony that we have heard from witnesses? It is not doing them any good to continue to have hearings where we just hear the allegations and aren’t acting to address it.

I, for one, and I know the ranking member and other members on this committee want to get to the point where we are fixing this. Not just for the CFPB, but for any agency where discrimination ex-ists. And so, can I ask that of you and the full committee as to when we will get to that point in the process?

Chairman MCHENRY. Just as a subcommittee chair, and I appre-ciate the gentleman yielding in the spirit he is asking the question, I have not drawn any conclusions yet. I want to get to the bottom of what this is, if it is truly a structural problem.

That is why my questions this morning to Mr. Cordray were about what actions he has taken on the people whose subordinates have been awarded a settlement for the manager’s discrimination. Yet that manager still receives high marks, promotions, and bo-nuses. That is problematic.

And so, I have gone into this with an open mind. And I certainly appreciate my colleagues on this committee coming with the same sentiment. I haven’t come to the conclusion yet. But I do think that accountability is a measure.

And to Mr. Williams’ point when he said that—you said that after the last hearing, there was a change. Apparently, the agency is listening. I don’t know to what degree.

And I am sorry to take up so much of your time, but— Mr. HORSFORD. No. I appreciate it, Mr. Chairman. I guess be-

yond having hearings though, that to me is not really addressing the problem.

We have the report. The issues were exposed. The ranking mem-ber told you from day one that discrimination exists. So what are we going to do to fix this?

Chairman MCHENRY. And I would be happy to work with the gentleman on solutions.

Mr. HORSFORD. Thank you, Mr. Chairman. Chairman MCHENRY. I certainly appreciate it. We will now go to Mrs. Wagner, the gentlelady from Missouri,

for 5 minutes. Mrs. WAGNER. Thank you, Mr. Chairman. I appreciate it. And I

certainly thank our witnesses for their bravery in coming forward and testifying.

I would also remind this subcommittee that we did have a CFPB markup just last week. And I had the pleasure of speaking on be-half of the Stivers bill that asked and called for—it passed out of full committee—an independent IG that is outside of the purview of the Fed. I think that is one of many things that we can be look-ing at. But that actually is something that passed out of this com-mittee, and I hope it will make it to the full Floor.

I have to tell you, one of the most stunning things that I have seen, and I have just read through this letter from the attorney of Ms. Liza Strong, who is again the Lead of Employee Relations for the CFPB. And she has sought to strike and bar the opening state-ments of employees, specifically Mr. Naraghi.


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I have to tell you the arrogance, hubris, the doubling down of hu-miliation and retaliation is absolutely unconscionable. We do need reforms. We do need transparency. We do need accountability, oversight, power of the purse, all of the above.

I will get to my questions here. Mr. Williams, you state in your testimony that you were the

Quality Assurance Monitor at the Office of Consumer Response. In that role, you found problems with certain aspects of the program that were ineffective or inadequate or flawed. Did you ever raise these problems with anyone at the CFPB?

Mr. WILLIAMS. Absolutely, ma’am. I raised them on numerous oc-casions.

Mrs. WAGNER. Did you ever raise these problems to the CFPB’s Inspector General?

Mr. WILLIAMS. No, ma’am. Mrs. WAGNER. Did you ever get the sense that your managers at

the CFPB thought that you had complained to the CFPB’s IG? Mr. WILLIAMS. Yes, ma’am. They misidentified me as a whistle-

blower. Mrs. WAGNER. What made you think that? Mr. WILLIAMS. One, the intensity of the scrutiny I faced, and in

a confidential manner it was revealed to me that I was misidentified as the whistleblower.

Mrs. WAGNER. How did your managers find out that an employee had complained to the CFPB’s Inspector General?

Mr. WILLIAMS. Someone in the IG’s office—somehow this got leaked out to CFPB management. It was leaked out to not just ex-ecutive leadership, but especially to Consumer Response.

Mrs. WAGNER. From the IG’s office, Mr. Williams? Mr. WILLIAMS. It had to be, yes, ma’am. Mrs. WAGNER. Do you believe that your managers retaliated

against you for being a whistleblower even though you were not? Mr. WILLIAMS. Yes, ma’am, every day they could. Mrs. WAGNER. And why is that? Mr. WILLIAMS. Because they were bullies, plain and simple. I

don’t have any big words for it. They were bullies. They were untrained. None of us were prepared for the enormity

of the—me included. None of us were prepared to launch a Federal investigation under these circumstances and put together a major contact center. I, at least, knew we weren’t prepared.

Mrs. WAGNER. Let me ask a question here. Has the CFPB hired any new African-American managers to work in the Office of Con-sumer Response?

Mr. WILLIAMS. No, ma’am. Mrs. WAGNER. Is there any fathomable explanation for why the

CFPB has failed to recruit new African-American managers in the Office of Consumer Response?

Mr. WILLIAMS. The current administration there, ma’am, is the answer. When you change the current administration, it might change the climate. But they have infused—there are so many of their cronies in Consumer Response that you are still going to have the roots of that there.

So you have to change the whole scheme. And that might get some results.


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Mrs. WAGNER. Thank you, Mr. Williams. Mr. Naraghi, is it true that you shared your concerns about the

favoritism and the mismanagement with the CFPB’s Inspector General in 2012?

Mr. NARAGHI. Yes, ma’am. Mrs. WAGNER. How did the CFPB’s Inspector General react to

your concern? Mr. NARAGHI. In my initial call, I was pleasantly surprised. I was

immediately contacted. And they saw to get my—not only about my mistreatment, which they recommended for me to seek EEO help, but they asked me to let them know. And the main reason I called them is because I was concerned about my responsibility as a gov-ernment employee to report any misuse of funds.

And after I sent them the email enumerating what I thought were wrongdoings, I never heard back from them.

Mrs. WAGNER. You never heard back— Mr. NARAGHI. No, ma’am. Mrs. WAGNER. —from the IG? Has the CFPB’s Inspector General in any way been helpful to

you in increasing transparency or accountability for mismanage-ment to CFPB?

Mr. NARAGHI. Not that has been apparent to me. Mrs. WAGNER. I thank you, Mr. Chairman. I will yield back. Chairman MCHENRY. I appreciate the gentlelady yielding back.

We will now recognize the vice chairman of the subcommittee, Mr. Fitzpatrick of Pennsylvania.

Mr. FITZPATRICK. I thank the chairman. And I also thank Mr. Naraghi and Mr. Williams for your courage in coming forward to this committee like Angela Martin and other employees before you. It takes a great amount of fortitude and courage to come to the committee to make the statements you have made.

We understand that there are several employees back at the Bu-reau, dozens if not more, who for a variety of reasons don’t feel ca-pable to come forward and give their statements. We have seen some anonymous statements. But you are giving them a voice as well and that is also an important role that you are playing and service that you are giving to the Bureau and to your fellow em-ployees.

Mr. Naraghi, you indicated in your written statement that you found that voicing professional dissenting opinion would ultimately in many cases result in retaliation. You give a number of examples.

For instance, one was when you were pointing out inefficient use of Bureau resources, the wasting of Federal tax dollars. You talked about it in terms of sending reviewers or inspectors to cities where there were qualified individuals already there, and significant trav-el expense and things along those lines. And I am sure there are many examples.

Did you guys at the Bureau ever engage in video teleconferencing to try to save dollars?

Mr. NARAGHI. No. You have to remember the exam group that I belong to that is in a part under supervision has hardly besides their—the senior management of the area, we work out of our homes. Seventy percent to 80 percent of the time we are on travel, so which means we are at the institution site.


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And no, to the—they may use it at the headquarters, but I am not aware of it.

Mr. FITZPATRICK. You never used video teleconferencing in order to save the Bureau dollars? And you are suggesting that you actu-ally pointed out wasteful use of Bureau resources and were retali-ated against for doing so?

Mr. NARAGHI. That is true. Mr. FITZPATRICK. Now, we were interrupted a little bit by some

votes on the Floor. So I didn’t see your entire opening statement. But I understand that there was a cultural slur that you referred to in your opening statement. What was that?

Mr. NARAGHI. ‘‘F’ing foreigner’’ is how my field manager used to refer to me. It wasn’t in my presence. And it was at the huddle.

Each region has three huddles, what they call it. Three times a year they get all the examiners together. And in this particular one they had hired some new examiner that my manager did not know, had not met. And on the elevator this new examiner heard him refer to me in those terms.

Mr. FITZPATRICK. What did the CFPB relations, employee rela-tions and the Equal Employment Opportunity office, what did they do when you brought that to their attention?

Mr. NARAGHI. I talked to Liza Strong and she said oh, absolutely we don’t tolerate that. But, like the gentleman said, there are al-ways two sides. I was promised there would be investigation. I never heard back from them.

I brought that to the investigator’s attention and she is the one who actually made a note of it. And management in their interview by the investigator said oh, we don’t know what he is talking about, basically denial.

But I did find out last night, late last night the president of our union called me and he said that they have actually started an ex-amination or investigation into that just now.

Mr. FITZPATRICK. So it sounds like you brought it to their atten-tion on multiple occasions. When we review inappropriateness, we are looking for a timely response and an appropriate response. You are saying just last night you were advised that they will now look into it?

Mr. NARAGHI. That they have just started the investigation, yes, sir.

Mr. FITZPATRICK. Mr. Williams, is racial discrimination within the Office of Consumer Response widespread, in your view?

Mr. WILLIAMS. It is concentrated in one area that I can attest to. I would imagine that it exists. But I can tell you that it is con-centrated in one area.

Mr. FITZPATRICK. Did you witness favoritism in hiring at the CFPB?

Mr. WILLIAMS. Absolutely. Yes, sir. Mr. FITZPATRICK. Can you describe it to us? Mr. WILLIAMS. So I am your friend, and I need a job. Well, lo and

behold, out of the millions or thousands of people who may apply, we are going to pick you. Then, after you are there 6 to 8 months, you need a promotion. So if it is not on the org chart, I will create it.


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So then, I have brought you on. You don’t have any tenure. The agency is only 3 years old. Now, I have hired you. I am going to give you six figures. And now I am going to reward you with a team lead position that you are just not qualified for, but don’t worry about it because I will deflect any criticism.

Mr. FITZPATRICK. My time has expired. Thank you, Mr. Williams. Chairman MCHENRY. I appreciate that. Thank you, Mr. Vice

Chairman. Mr. Hultgren of Illinois is recognized. Mr. HULTGREN. Thank you, Mr. Chairman. And I thank you both

so much for being here. First, I want to ask Mr. Naraghi a couple of questions. What

happened after you filed your first formal EEO complaint? Mr. NARAGHI. Immediately afterwards, I was issued a reprimand

letter. Mr. HULTGREN. Did you construe the letter of reprimand that

you received shortly after filing your EEO complaint as an act of retaliation?

Mr. NARAGHI. I believe so. Mr. HULTGREN. Have you experienced any additional instances of

retaliation? Mr. NARAGHI. Absolutely. Mr. HULTGREN. Can you tell me about that? Mr. NARAGHI. Absolutely. I have a huge list. I think the com-

mittee wouldn’t have enough time. But I can give you a few exam-ples.

The biggest retaliation is I was given a bad grade for an exam where I was doing my job, in other words, telling my inexperienced manager that what he was telling the institution was wrong, in a polite, professional manner. That was when they cancelled my va-cation, wrote a bad evaluation for me, and gave me all 1s despite my work being satisfactory.

And they also denied me a raise. So, I had started in 2011, and I didn’t get a raise until 2013. And that affects not only obviously my pay, but any opportunity because it took me a year to prove them wrong. And it took me seeking a different manager.

One of the practices—it may be true across the CFPB but I can only speak to us, the Southeast Region—is if anybody makes a complaint about racism or discrimination, they put them under a minority manager thinking that—they did that to me. The gen-tleman who had made a reference to me as a ‘‘F’ing foreigner,’’ I had to call Ms. Strong 3 or 4 times, and send several emails seek-ing to have another manager who could be unbiased.

After a few months, they assigned me to an African-American manager, in their mind thinking well, the African-American man-ager cannot be biased because he is a person of color. Do you know what I am saying? I think they may be under some sort of a mis-understanding that like he was saying, colored people do discrimi-nate against colored people as well.

Mr. HULTGREN. Mr. Williams, can you elaborate on how other Af-rican-Americans have faced racial discrimination within the Office of Consumer Response?

Mr. WILLIAMS. Well, the assignments. In Consumer Response, and specifically in intake, if you were not someone that they fa-


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vored, your work is not only going to be intensely scrutinized, they are going to send you constant emails about the rate of work that you are producing. Why didn’t you finish this? Do you see how many you have? And they would do that constantly.

I can speak from my experience—my quality assurance manager and section chief were waiting until 5 o’clock, and they would have a write up or something. Or in one instance they created a policy that probably doesn’t exist, and wrote me up. I took it to Liza Strong, gave her the document, and said that we don’t even think this policy ever existed. She said, okay. It was really nice, a pleas-ure, but she did absolutely nothing.

I took it to her personally, called her on the phone, said here are the documents, Liza Strong. Can you show me where this policy ex-ists? They have never done it. I even showed her that if this policy exists, the vendor is doing the same thing. So you are going to tell me that your vendor is violating the same policy? They have never answered that. So those are examples.

Mr. HULTGREN. My time is going by quickly, so I want to ask you just a couple more questions to both of you.

Do you believe that the CFPB is hypocritical in how it addresses its internal discrimination? If so, why do you believe this?

Mr. WILLIAMS. Absolutely, sir, because I am the only person who has ever been punished. They didn’t renew my contract. The rest of them have all been promoted and have gotten raises. I am the one who had to go out and seek other employment.

Mr. NARAGHI. I am aware of—not to myself because I came from the Federal Reserve and competitively took my position—colleagues who were brought over on contract whether from the OCC or other agencies. These are people of color, different nationality, origin. And CFPB management has refused to make them permanent em-ployees, even though I have had the privilege of working with them and they are very capable examiners.

However, there are White examiners who have been made into permanent employees. So even though I wasn’t subject to it, I am aware of it, and I have seen folks like that.

Mr. HULTGREN. My time has expired. I yield back, Mr. Chair-man.

Thank you both. Chairman MCHENRY. I thank my colleague. We will now go to

Mr. Duffy of Wisconsin. Mr. DUFFY. Thank you, Mr. Chairman. Listen, I first want to thank the panel for their testimony today.

I know it is not easy to stand up and walk forward and be the voice for many in your organization, in the Bureau who don’t feel they can stand up and tell these stories. And I think everyone on this committee has bipartisan recognition of how difficult it is to actu-ally come forward because the light shines that much brighter on you when you do it. And so, I thank you for your courage in coming forward.

In that regard, has it been a pleasurable experience coming for-ward and testifying before Congress for the both of you? Mr. Naraghi?

Mr. NARAGHI. It has. To me, it is like a huge weight has been lifted off my shoulder. I was beginning to doubt myself because


29

every complaint or everything I brought to management’s attention has been just denied like it is a figment of my imagination. And I am seeing that people listen, and say, no, you are right to have taken it that way.

I feel like a huge weight has been lifted off my shoulders. So, it has been pleasurable.

Mr. DUFFY. Good. Mr. NARAGHI. Thank you. Mr. DUFFY. Mr. Williams? Mr. WILLIAMS. No, sir. The only thing I wanted to do was work. Mr. DUFFY. That is right. Mr. WILLIAMS. They took my job that I started that unit. No, this

isn’t pleasurable, I am getting scrutinized. This is on the internet. I don’t want to be here. Who in their right mind wants to come up here? No, I don’t want to be here.

Mr. DUFFY. And that is what I actually thought the answer would be, and not a weight being lifted off. It is not pleasurable. It is difficult to come forward and to expose what is going on. And again, Mr. Williams, I am grateful for your willingness to step for-ward.

When you were telling your stories about the racism, the lan-guage that I won’t even repeat, it was being used against the both of you. Did you see a lot of people rally to your aid, step up and say, it is 2014, listen, at this new agency, that is not acceptable. We are going to stand by you. We are going to fight for you and we are going to root this out.

Mr. NARAGHI. I speak about my own. It was a colleague who saw or overheard what happened and was disturbed by it. And he since then has actually quit the Bureau. He was already unhappy for sit-ting at home. Once he heard this, it was kind of a last nail in the coffin for him.

And as far as other folks, they are afraid to speak up. It is a real-ly sick environment that we work in. So folks, I don’t expect them—the only one that I referred to in my testimony, brave be-cause he was brave because management knew who he was. He even gave me authority to use his name in appealing my evalua-tion. He is truly my hero and he is truly a straight shooter.

Mr. DUFFY. Thank you. Mr. Williams? Mr. WILLIAMS. Every member of management from the chief op-

erating officer down to Liza Strong lied to me and the National Treasury Employees Union. Employees wanted to rally openly, but they know that there is a retaliatory environment. I was the only one that CFPB Consumer Response management could retaliate against because they refused to make me a permanent employee.

So there is a different hurdle. There is no hurdle to retaliate against me. Every member of leadership lied to me or the union directly. So they did nothing for me.

Mr. DUFFY. I say this with some reservation. To the ranking member’s comments about making sure we do a full investigation, I agree with that. And to his comments of his experience of racism, I can’t imagine the pain. And we had a culture that did behave and still does behave that way.


30

But I imagine when someone has two drinking fountains, there is no investigation. When you see it, you know it, and that is rac-ism. When we hear the language that has been used, when we read the investigations that have been put together from the outside looking in, yes, we can investigate a little bit more. But I am tell-ing you what. If it walks like a duck and it quacks like a duck, I am telling you it is a duck.

And so I promise that this committee will continue to expose what has happened. I know we are going to have a bipartisan buy- in to make sure that we root it out, and you both can have a work environment that is consistent with the skills and mission and drive that you bring to consumer protection. I promise you that.

I yield back. Chairman MCHENRY. The Chair now recognizes Mr. Rothfus

from Pennsylvania for 5 minutes. Mr. ROTHFUS. Thank you, Mr. Chairman. And let me echo the

sentiment of my colleagues in commending you for the fortitude to come here today to tell your story.

Mr. Naraghi, in your prepared testimony you addressed the issue of the risk model that CFPB uses in its supervisory program. Could you explain what a risk model is and why it is significant in bank exams?

Mr. NARAGHI. A risk model is—essentially you should think of it in a basic term—is a measuring stick that you use against all insti-tutions. It is a model that you assess what are the critical functions of a given institution and what are the tolerance levels of that. It is basically defined therefore you are going to an institution.

When you don’t have a risk model we go through a—institution A versus institution B. And let’s say we find 10 issues in A and only 5 in B, and we rate A higher than B. There is nothing to back up whether or not you have been subjective or objective in deter-mining it.

However, if there is a measuring stick that you hold against both institutions, then you have done a fair job and your question can be—your assessment can be reviewed and confirmed by folks who may not be experts in that area. But they can see that you treated both of them fairly.

Mr. ROTHFUS. So in your tenure at CFPB, have you had to con-duct exams without a risk model in place?

Mr. NARAGHI. Yes, sir. Mr. ROTHFUS. When did the CFPB ultimately adopt a risk

model? Mr. NARAGHI. They issued a—for mortgage servicing, they issued

a manual. I believe it was in the first part of 2012. I am not sure about the day. And then later on, by the end of 2012, we got a com-prehensive examination manual, which they are having also serve as a risk model.

Mr. ROTHFUS. And that was by the end of 2012, you said? Mr. NARAGHI. Yes. The most recent one was reissued because of

the new regulations at the beginning of this year. But we have had one since 2012.

Mr. ROTHFUS. How did you evaluate banks without having a risk model?


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Mr. NARAGHI. I relied—basically, we had nothing to go by. And as far as my assignment was concerned, I led the examination of mortgage servicing. But I based basically my directive the staff or examiners that I was working with to go through what I recall from proper examination techniques from the Fed. Because I have about 20 years of experience in conducting examinations.

Mr. ROTHFUS. Do you have any concerns regarding the CFPB’s 2012 supervision manual? For example, does this model align with actual exam practices?

Mr. NARAGHI. There are a lot of problems to be worked out. In my opinion, what they have done is they had lawyers write advi-sory information, which is the information the bank or financial in-stitution or nonbank provides us, and then we got the manual. They don’t tie in. They are not in parallel. So, there are a lot of issues.

And the manual was written, again, by attorneys. It is not what we normally do in a supervisory entity because it doesn’t give enough. It just says ask for such and such information and review.

It doesn’t tell the examiner, especially because more than half of the examiners at the CFPB are inexperienced folks. They have ex-pertise in the industry, but this is their first time doing examina-tions. I think it is critical for them to know what you are assessing and how do you go about assessing that particular function.

Mr. ROTHFUS. Mr. Williams, during your time at CFPB, how did CFPB define a breach of personally identifiable information?

Mr. WILLIAMS. We would file a PII breach. You could find them a couple of different ways. One, during a quality assurance evalua-tion of one of the monitors, we might find them. The other way, if the vendor self-reported or if the consumer contacted, as they did some vendors, I think.

Some consumers contacted the New York Times at one point con-cerning three breaches. But those are the three typical ways you find them.

Mr. ROTHFUS. How often did breaches of PII occur at the CFPB call center?

Mr. WILLIAMS. It occurred frequently but there wasn’t a pattern. You would see it might happen, as I stated earlier, it might happen 3 times and then you don’t see it for a while. Then all of a sudden, you see it again.

Mr. ROTHFUS. In your opinion, was the number of PII breaches and incidents high, low or about normal for a call center?

Mr. WILLIAMS. It was high. Mr. ROTHFUS. In your view, would there be fewer incidents in

breaches of PII if the Office of Consumer Response had more expe-rienced managers?

Mr. WILLIAMS. Absolutely. Mr. ROTHFUS. Thank you. Thank you, gentlemen. I yield back. Mr. FITZPATRICK [presiding]. The Chair now recognizes the rank-

ing member of the subcommittee, Mr. Green. Mr. GREEN. Thank you, Mr. Chairman. And I must say, if I may

in passing, that you look good in that seat. If I may, Mr. Williams, I make notes and I go back through my

notes to provide some degree of clarity. So let’s start with a state-


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ment that you made, only to provide clarity, Mr. Williams, I assure you. You indicated that while under subpoena today, you were making certain statements.

And to provide clarity, I want to make sure you understand, and I believe you do, that you are under subpoena today because you requested a subpoena. The committee would have allowed you to come without subpoena. But it was at your request that we issued a subpoena. Are you aware of this?

Mr. WILLIAMS. I am aware of that. Mr. GREEN. Okay. Let me go to my next point. You indicated something about organizations that would be as-

sisting you if certain circumstances existed with reference to the complexion of supervisors. Do you have proof today of contact prior to being subpoenaed, let’s start with that as our asset point. Do you have proof of contact prior to being subpoenaed of contacting civil rights organizations?

Mr. WILLIAMS. Yes, sir. Mr. GREEN. Do you have that proof with you today? Mr. WILLIAMS. I can look at my phone and show you the records.

I could probably— Mr. GREEN. No, no. You can do this for me. Just tell me what

organizations did you contact? Mr. WILLIAMS. My family and I, we reached out to Congress-

woman Waters’ office— Mr. GREEN. Do this for me, organizations, civil rights organiza-

tions. For example, did you contact the NAACP? Mr. WILLIAMS. We contacted Reverend Al Sharpton’s Action Net-

work. We talked to people—because I am from Chicago, we talked to people from Operation PUSH.

Mr. GREEN. Did you do that personally? Mr. WILLIAMS. Personally, and other people on my behalf. Mr. GREEN. Just tell me about what you did personally if you

would, please. Mr. WILLIAMS. Yes. Mr. GREEN. Personally, you contacted the NAACP? Mr. WILLIAMS. I didn’t contact the NAACP. Mr. GREEN. You did not? Mr. WILLIAMS. No, sir. Mr. GREEN. Personally, did you contact the National Action Net-

work? Mr. WILLIAMS. Yes. Mr. GREEN. Okay. And personally, did you contact some other or-

ganization that you can call to my attention now? Mr. WILLIAMS. Yes. Mr. GREEN. Okay. If you would, please? Mr. WILLIAMS. Back home, I contacted Operation PUSH. Mr. GREEN. PUSH? Mr. WILLIAMS. Yes. Mr. GREEN. Okay. And any others? Mr. WILLIAMS. My family— Mr. GREEN. You personally, only what you did personally. Mr. WILLIAMS. No, sir. Mr. GREEN. Okay. And I have a reason for asking it this way in

terms of personal contact.


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Now let’s talk about this. You are both fair-minded people and you want to make sure that you are treated fairly. But you also want to make sure that others are treated fairly as well. Is this a fair statement that you want to make sure others are treated fairly as well?

Mr. WILLIAMS. Sure. Mr. GREEN. Let’s talk about some of the others. One of you hav-

ing been a bank examiner, I will just use banks as a part of this question.

If we find that banks have employees who are expressing similar concerns, would you want us to hold ex parte hearings with ref-erence to these employees? For fear that you may not understand the term ex parte, just let me ask you, would you want us to hold hearings similar to these hearings with bank employees if they were experiencing similar circumstances?

Mr. Williams, would you want us to hold hearings with banks? Or is this just for the CFPB that you want these things done? So would you want us to do a similar thing? If you were working at a bank and you had similar circumstances, and Congress has over-sight of banks, would you want us to do this, Mr. Williams? Would you want us to hold similar hearings?

Mr. WILLIAMS. I would want you to do what is prudent, yes, sir. Mr. GREEN. All right. You would want me to hold these hearings.

Is that right? Mr. WILLIAMS. Yes, sir. Mr. GREEN. Okay. And Mr. Naraghi, would you want us to do the

same thing? Or is this only for the CFPB, Mr. Naraghi? Mr. NARAGHI. No. Mr. GREEN. Would you want us to do a similar thing with banks? Mr. NARAGHI. Here is what I would say about that. Mr. GREEN. No, you will say yes or no for this one, please. Would

you want us to do the same thing if banks were discriminating in-vidiously against people?

Mr. NARAGHI. In my capacity as a bank examiner or just as a— Mr. GREEN. No. Would you want Congress to call in to give those

persons at banks to come before this committee and testify? Would you want us to give them the opportunity to do so?

Mr. NARAGHI. Do you want my personal opinion or my opinion as a bank examiner?

Mr. GREEN. Yes. I am asking you for your personal opinion. Would you want this to happen? Or is it only for the CFPB?

Mr. NARAGHI. No. If possible, yes. Mr. GREEN. You would. All right. Would you want—you said level the playing field, Mr. Williams.

Would you want us to level the playing field with banks? If we find that banks have an unlevel playing field, would you want this com-mittee to do what it can—

Mr. WILLIAMS. Absolutely. Mr. GREEN. —to level it? Mr. WILLIAMS. Yes. Mr. GREEN. All right. Let’s move on. Would you want us to use disparate impact as a theory with

banks? You indicated that we are using it today. Would you want us to use the same theory with banks?


34

Mr. WILLIAMS. Absolutely. Mr. GREEN. Would you want us to have persons who are working

at banks who may be hearing what we are saying today by and through television or some other means of hearing these pro-ceedings, would you want them to contact us, just as you were able to contact us?

Mr. WILLIAMS. Yes. Mr. GREEN. Would you want them to contact us and say, my

bank is discriminating against me? Mr. WILLIAMS. Yes. Mr. GREEN. And should we hear from these witnesses just as we

are hearing from you without the benefit of hearing from the other side? If a person says, I have been discriminated against, do you want us to hear from them just like I am hearing from you today, same way, no change?

Mr. WILLIAMS. Yes. Mr. GREEN. Thank you. Sir, Mr. Naraghi? Mr. Naraghi, you hesitated on some important

questions. Are you here for the CFPB only? Or do you want to see people who are being discriminated against regardless of the venue have an opportunity to be heard?

Mr. NARAGHI. Sir, the reason I hesitate is it is beyond my knowl-edge or—

Mr. GREEN. I am not asking you about what you know about banks. I am asking you that if you were working at a bank and experiencing these same circumstances, would you want the chance to sit in this chamber today—

Mr. NARAGHI. If possible, yes, sir. Mr. GREEN. Okay. Finally, you said to change the administration, Mr. Williams. If

a bank had similar circumstances, would you want the administra-tion at the bank changed? I am using your exact language. You said—

Mr. WILLIAMS. Yes. Mr. GREEN. —change it. You agree, Mr. Naraghi? Are you only here for the CFPB, Mr.

Naraghi? Mr. NARAGHI. Yes— Mr. GREEN. Do you want to see other people— Mr. NARAGHI. —I am here for the— Mr. GREEN. —who are discriminated against to have the same

opportunity? Are you here to eviscerate and emasculate the CFPB? Mr. NARAGHI. I am not. Mr. GREEN. Would you want to see banks treated the same way? Mr. NARAGHI. Absolutely. I think they are because of our laws. Mr. GREEN. All right. Finally, I would like to submit for the

record the request that the ranking member and I, along with other members of the subcommittee, have made to all seven of the Inspectors General with reference to investigating complaints of discrimination. This would include the CFPB.

I would also, Mr. Chairman, ask that we include for the record a document titled, ‘‘Objective and Approach for Offices of Inspector General (OIG) Review of Office of Minority and Women Inclusion (OMWI) Activities. And it goes on to indicate, ‘‘Requested by Rank-


35

ing Member and Colleagues, House Financial Services Committee, on March 24, 2014.’’

And it indicates, Mr. Chairman, that the Inspectors General will be looking into allegations of discrimination, employee satisfaction results, hiring, and promotions, and goes on to indicate that the final evaluation will be presented by late November 2014. If there are no objections, I would like to submit these for the record.

Mr. FITZPATRICK. Without objection, they will be made a part of the record.

Mr. GREEN. Thank you, Mr. Chairman. I will yield back. Mr. FITZPATRICK. The Chair recognizes Mr. Barr for 5 minutes. Mr. BARR. Thank you, Mr. Chairman. And thank you to the wit-

nesses for your testimony here today. In reference to the ranking member’s line of questioning just con-

cluded, Mr. Naraghi, I am just curious. In your time as an exam-iner at the Bureau, did you ever uncover or discover any of the kind of discrimination that you personally experienced at the Bu-reau?

Mr. NARAGHI. No, sir. Mr. BARR. You testified that results-oriented examinations in

which these exams were decided or the results of those exams were decided at the outset for the purpose of finding a violation even if none were identified, and that the field manager told you that you must not have done your job right because you did not identify any violations. Is that correct?

Mr. NARAGHI. Yes, sir. Mr. BARR. Is that a common part of the culture at the Bureau? Mr. NARAGHI. I cannot speak to that about the Bureau. You have

to remember I represent—I am an examiner in the Southeast Re-gion. I have had that happen to me on at least two occasions, which even one of them should not happen.

Mr. BARR. So in other words, you are telling me that at the Bu-reau, in your capacity as an examiner, management basically told you that you didn’t do your job if you found no violations with the regulated entity?

Mr. NARAGHI. Some. Remember, I said we have a lot of inexperi-enced managers. And the Director of my region keeps hiring his cronies. So yes, that I have seen.

Mr. BARR. Okay. And Mr. Naraghi, you also testified that individuals in your team

were told to expand their sample size if no violations were identi-fied in their initial sample. And you made the point that there is no statistically sound rationale for conducting examinations in this manner. Can you explain that a little bit more? Can you amplify that a little bit more?

Mr. NARAGHI. Absolutely. Their standard examination protocol calls for you to determine a sample size as statistically based on what is the total population of that area you are examining, the transaction you are examining, and you come up with a number. And you randomly select that. The reason is for it to withstand the scrutiny both by the bank or institution management as well as in a court of law or anything that we are treating everybody fairly, unbiasedly.


36

When the only time you extend your sample, as the examination protocols call for, is if you find enough errors, or basically viola-tions, violation of law, violation of their own protocols. That is when you expand your sample.

Mr. BARR. Mr. Naraghi, this sounds kind of like it is a fishing expedition. You take a statistically accurate sample, and no viola-tions are found. There must be something wrong because all the banks are doing the right thing. That is the attitude of the Bureau.

Mr. NARAGHI. Actually, it is funny you say a fishing expedition because that was my point of argument with the enforcement attor-ney who was wanting to expand the sample. I said I don’t want— and this is brand new agency. I don’t want us to appear like we are on a fishing expedition.

Mr. BARR. And then finally, in your testimony, I think the most striking observation that you made about the Bureau in which you worked, that lawyers from the Enforcement Division, they come into these—they come in and they mention plans to bring enforce-ment actions before the completion of the exam work and before discovering a violation.

So it seems to me that the justice system in our country is totally disregarded by this Bureau in the sense that there is a presump-tion that everybody in the private sector is doing something wrong. It can’t be right if there are no violations. And so, we are going to enforce before we even discover that there is a violation.

Mr. NARAGHI. Yes. And that is why it bothered me, and the occa-sion that happened to me I documented by sending my manage-ment an email indicating so.

Mr. BARR. Do you think that this is a fair-minded approach to enforcing consumer protection laws in the United States?

Mr. NARAGHI. Absolutely not. Mr. BARR. Let me just ask you one more question or two more

questions. I don’t have much more time, but do you believe that the exams that are conducted at the CFPB are aligned with industry standards of auditing? Why or why not?

Mr. NARAGHI. No. Because depending on who is conducting the exam, who is the member of management, it could be aligned. And the ones who are inexperienced or don’t have it are not.

I want to emphasize this. There are a lot of good examiners in our system at CFPB and a lot of hard work goes on. What I have seen is basically incompetent management that is causing these issues that I bring to your attention.

Mr. BARR. Mr. Naraghi, I appreciate your testimony here today. And I think you have really elucidated some underlying problems with this agency. I appreciate your testimony.

I yield back. Mr. NARAGHI. Thank you. Mr. FITZPATRICK. There are no further questions this afternoon,

so we would like to thank the witnesses for their time and for their testimony.

The Chair notes that some Members may have additional ques-tions for this panel, which they may wish to submit in writing. Without objection, the hearing record will remain open for 5 legis-lative days for Members to submit written questions to these wit-nesses and to place their responses in the record. Also, without ob-


37

jection, Members will have 5 legislative days to submit extraneous materials to the Chair for inclusion in the record.

Without objection, this hearing is adjourned. [Whereupon, at 4:17 p.m., the hearing was adjourned.]


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